South America looks at creating “lithium OPEC”
Argentina, Chile, Bolivia and Brazil are analyzing the creation of a lithium cartel of sorts in charge of expanding South America’s processing capacity, turning more of their mined lithium into batteries and tapping into the electric vehicles (EVs) manufacturing sector.
The group would emulate similar schemes, such as the Organization of the Petroleum Exporting Countries (OPEC), in terms of coordinating production flows, pricing and good practices, representatives of the Argentinean delegation said at the annual PDAC Convention, held this week in Toronto, Canada.
Argentina, Chile, Bolivia have been negotiating since July last year, when foreign ministers of each country met at the Community of Latin American and Caribbean States (Celac) conference in Buenos Aires.
The three countries make up the so-called lithium triangle, which has about 65% of the world’s known resources of lithium and reached 29.5% of world production in 2020.
While Brazil’s lithium sector is just waking up to global demand, the nation has auto-making experience and it is already a global case study in low carbon mobility, powering cars with ethanol, biofuels and natural gas.
With Sigma Lithium (TSX-V; NASDAQ: SGML) coming into the mix with the opening of its Grota do Cirilo lithium mine in April, Brazil will have one of the few companies globally that has proven its ability to produce lithium in an environmentally sustainable manner.
“We have to prepare ourselves for what’s coming and be able to adapt — beginning perhaps with cells, working toward industrialization, and getting to batteries,” Argentina’s mining undersecretary Fernanda Avila said in an interview at PDAC.
Shared interest in maximizing the benefits of soaring demand for batteries and increasing prices has revived regional talks for cooperation.
Even Mexico, which traditionally has partnered with the USA and Canada, has made moves to partner with its southern neighbours.
Studies indicate that Mexico has about 1.7 million tonnes of lithium reserves. While close to a dozen foreign companies have active mining concessions that aim to develop potential those deposits, President Andres Manuel Lopez Obrador has said all of them will be “reviewed” in light of the recent nationalization of the resource.
JPMorgan said last year it expected Argentina to grow from supplying 6% of the world’s lithium in 2021 to 16% by 2030. If the prediction turns out to be correct, Argentina would overtake Chile as the No. 2 lithium producer in the world by 2027, behind only Australia.
Argentina has been welcoming foreign investment since the 1990s, while Chile and Bolivia have been hesitant to allow foreign companies to exploit their reserves.
The country has attracted major miners over the past two years, including the world’s second largest miner Rio Tinto and South Korean steelmaker Posco.
Investments in the lithium sector reached an estimated $1.5 billion last year, data from the Cámara Argentina de Empresarios Mineros, a group of mining entrepreneurs, shows. The body forecasts that investments would reach more than $5 billion in the coming years, as the country currently hosts more than 20 projects in various stages of development.
Chinese carmaker Chery Inc. revealed plans last month to build a $400 million EV and battery plant in Argentina.
Fellow battery maker Gotion High-tech Co. is looking at cooperating with the government of Jujuy, one of Argentina’s three lithium-producing provinces, while weighing the construction of a lithium carbonate refinery in the region.
(With files from Bloomberg)